Non-bank lender targeted by ASIC

by 10 Dec 2013
A non-bank lender managed by a debt-plagued mortgage distribution company has been ordered to change its site after concerns it may have misled consumers.

ASIC has announced MyRate, a direct home loan lender managed by Firstfolio and funded by ING Direct, has made changes to its website and will contact affected customers following ASIC concerns that home loan interest rates advertised on the website may be misleading.

The concerns come amid announcements Firstfolio will undertake a $50.2 million equity injection that will result in the control of the business passing to a private equity investor. The proceeds will go towards repaying approximately $30m in debt, mostly owed to CBA, following a spate of acquisitions by the mortgage distribution company in recent years.

MyRate managing director Kevin Sherman told Australian Broker the business “will always take a positive approach in dealing with any concerns raised”.

“We are a customer service focused entity and as such, when ASIC approached us, we made sure that we worked with them to understand and address their points. We are happy that we were able to do so.”

ASIC was concerned the website gave the impression the advertised rate for a variable home loan applied to both existing and new loans when, in reality, it only applied to new home loans. This meant some customers with existing variable rate home loans were charged interest over the advertised rate.

In response to ASIC's concerns, MyRate has made changes to its website to prominently state on the home page that the advertised rate only applies to new loans. 

Further, MyRate has also agreed to write to all affected customers to confirm the advertised rate only applies to new loans. MyRate will provide their internal dispute resolution contact details and customers are encouraged to contact MyRate if they have any concerns that they may have been misled about the interest rate on their loan, or other questions about their loan.

ASIC Deputy Chairman Peter Kell said ASIC expects credit licensees to provide clear and accurate information to consumers in their advertising.

"Where advertising promotes a particular product feature, such as a low interest rate for a loan, the credit provider needs to make sure that any qualifications about how that rate applies are clear and that the information is not misleading in any way."

Sherman responded MyRate has always been “extremely proactive” in its approach to compliance.

“As always, we continue to monitor our environment and to respond to change in an appropriate manner.

“We maintain a positive, healthy relationship with our customers and look forward to working with many more Australian borrowers in the years to come.”

This is not the first time MyRate has been in trouble with ASIC. In 2006 ASIC ordered MyRate to change their promotional material after concerns a low, variable home loan rate was misleading.